BLM employment partner Julian Cox on The Chancellor's announced changes to the Furlough Scheme
Julian Cox, Head of Employment, London considers the options left to business following the Chancellor’s announcement (5pm Friday 29 May 2020) and whether it could leave employers at risk of legal claims:
“The tapering of the furlough scheme will represent a monumental challenge to businesses, though I’m sure many will be grateful that wage contributions will not be required until September onwards rather than August as first predicted. Whilst there is recognition that the scheme cannot exist forever, it will still be sorry news for businesses on the brink. This change will be particularly difficult for the most devastated sectors such as hospitality, which will be one of the last to reopen, reducing the likelihood of cash recuperation to make up wage contributions before August.
Faced with the costs of national insurance and pensions contributions, and eventually 10% and 20% towards wages, some struggling employers may have to consider re-organising and re-structuring their operations. The ‘flexible furlough’ update – allowing employers to bring employees back in for a few days a week and cover wages by furlough for the remainder – will be welcome, although the closure of the current scheme to new entrants by June 30th could make furlough less flexible in some businesses’ view.
Whilst the updates are not as severe as some predicted, it’s very possible today’s announcement could lead to a rise of redundancies in the coming weeks, though caution is encouraged before making immediate decisions. There are options outside of redundancy, such as changes to working patterns or salary reductions, that enable staff to remain in post whilst the business continues to weather the storm. Any updates to terms and conditions of employment, whether redundancy or hours reduction, must follow proper procedure and be agreed through a process of prior consultation. This is important if redundancies involve 20 or more employees, as this triggers a legal requirement to collectively consult.
Alongside a potential increase in redundancies, we could well see a spike in legal claims against companies who undergo re-structure and handle the process incorrectly. Any attempt to unilaterally impose changes could lead to claims of constructive dismissal, given these measures represent a substantive change to an employee’s contract.”